Shorten rallies support for another go at CBA

A spokeswoman for the CBA said the bank’s focus was on delivering compensation for victims.
Photo: Tamara Voninski

by
Nassim Khadem and Karen Maley

The major banks are frustrated by political interference and the prospect of a another probe into the
Commonwealth Bank
financial planning scandal as Opposition Leader
Bill Shorten
rallies the numbers for a new inquiry.

Mr Shorten said the new inquiry will be asked to consider the actions of the Commonwealth Bank, including by its executives during the alleged misconduct.

He said the bank – which is accused of fraud and forgery by its financial planning staff and a subsequent cover up by senior management – had not done everything it could to support the victims.

Mr Shorten said the new inquiry would again examine the Australian Securities and Investments Commission for failing in its duties, and whether stronger laws are necessary.

“What occurred at the Commonwealth Bank is scandalous," Mr Shorten said. “It is a scandal of shocking proportions, it should not be allowed to happen again."

A spokeswoman for the CBA told TheAustralian Financial Review the bank’s focus was on delivering compensation for victims after its chief executive
Ian Narev
last week announced a package, including a review of advice given between September 1, 2003 and July 1, 2012.

The bank has already paid $51 million in compensation to more than 1100 customers who were caught out in the scandal, but Labor senator Mark Bishop, who chaired the initial Senate inquiry, estimated the compensation bill could exceed $250 million.

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“CBA’s focus firmly remains on implementing the Open Advice Review program, which is the most comprehensive review and compensation program in the financial planning industry," the bank’s spokeswoman said.

“We are working hard to make sure the [compensation] program moves swiftly so our customers can have their cases reviewed and any compensation that is due is paid as soon as possible," she said.

Other major banks, which declined to speak on the record, said the financial sector was subject to much more political interference since the global financial crisis.

Consumers may bear the cost

Financial Services Council chief executive John Brogden said the­ industry would work with any public inquiry, but urged the government not to look back.

He said the financial advice industry had been through several inquiries since the GFC which have resulted in significant legislative changes. “Consumers will end up bearing the costs of any new regulation," he said.

The Parliament needed to review whether the Opposition’s FoFA laws would deliver more affordable and accessible quality advice as promised when Labor announced the FoFA legislation in April 2010, Mr Brogden said.

“Whilst FoFA has delivered reforms over the past five years that give the best consumer protections in the world, it will fail if millions more working Australians do not seek financial advice," he said.

Finance Minister
Mathias Cormann
said Labor’s call for another inquiry was a stunt and “opportunistic politics". He said government senators would participate if one is established, but he was still meeting with crossbenchers to try and convince them to pass the ­government’s amendments to Labor’s Future of Financial Advice reforms.

Clive Palmer
has said his Palmer United Party will side with Labor and the Greens in voting down the ­government’s regulations.

On Monday, Mr Palmer said there was a “real problem’’ with the financial planning industry and called for the sector to be properly investigated.

The advice is more frequently given by industry funds, that oppose Senator Cormann’s changes, than retail funds which support them.

Financial Planning Association chief executive Mark Rantall said the most important issue was “full, fair and swift compensation for impacted clients" in the CBA scandal but “should another inquiry occur it’s envisaged we would participate in a similar manner to the first inquiry".

Industry Super Australia chief ­executive David Whiteley said the inquiry should focus on “vertical ­integration" issues – where banks have bought up wealth management ­businesses who sell the bank’s products to ­consumers.

Mr Whiteley said this was done regardless of whether it was in the ­consumer’s best interests as a result of commissions and kickbacks paid to planners.

Mr Whiteley said it was “bewildering" that the federal government wanted to make intrafund advice be subject to opt-in arrangements.

He said if the issue was about creating greater transparency and making super funds publish how much of the administration fees paid by members was spent on advice as opposed to other marketing costs, their members would be open to it.

“If the government and regulators want super funds to disclose how member admin fees are expended through marketing and managing transactions, then of course we would comply," Mr Whiteley said, but added the industry funds would not want opt-in requirements to apply to intrafund advice.

Labor is seeking to link the Commonwealth bank disaster to the Abbott Government’s changes to its FOFA laws, saying that diluting the original reforms will result in more scandals.

“If the Finance Minister wants to have a debate about financial advice and watering down the laws which he’s proposing, just bring the laws to Parliament and have the debate rather than hide them," Mr Shorten said.

Mr Shorten said the bank was not doing everything it could to support the victims and “worse still, I am not convinced that the government is doing anything to indeed prevent this happening again to thousands of other Australians."